For tiny chance to prosper, we tolerate inequality

U. WARWICK (UK) — Even the smallest hint of an opportunity to prosper can make unfairness acceptable to people at a disadvantage, researchers say.

A study by Eugenio Proto, an economist from the Centre for Competitive Advantage in the Global Economy at the University of Warwick, looked at decision-making and how it is influenced by people’s perceptions of fairness.

“It seems that even if people believe they have just the tiniest of chances to become the next Bill Gates, it’s enough to keep them tolerant of obvious inequality,” says Proto.

Researchers set up a game between two people where one person (the proposer) offered to split £10 with a partner. The proposer was able to decide the exact amount he or she was willing to offer. If that amount wasn’t acceptable to the second person (the responder), then neither got any money.

Known as an ultimatum game, this kind of set-up is frequently studied by economists—but for the first time the study introduced an element of inequality via an increasingly-biased rigged lottery to decide who got to be the proposer, the stronger of the two positions.

It makes sense that when people see clear-cut unfairness, they are less likely to accept it—and this was shown in the results.

When the opportunity to become the proposer was 50 percent—in other words completely fair—responders on average rejected an offer by the proposer of £2.15 or less. And when the chance of becoming the proposer was rigged at 0 percent—or complete inequality—responders rejected offers of £2.96 or less.

But when just a one percent chance of becoming a proposer was introduced—the lottery was still vastly rigged biased in the proposer’s favor—responders rejected offers of £2.53 or less.

In other words the difference between having absolutely no chance and having just a one percent chance was valued at 43 percent (£2.96 – £2.53)—proportionally much larger than the 38 percent value (£2.53 – £2.15) given to the gap between 1 and 50 percent.

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“When you look at it rationally, it makes no sense that people are placing such a disproportionate value on that first one percent increase in opportunity,” says Proto.

“But that slight increase in fairness seems to have some kind of symbolic meaning. It appears people are happy to accept extreme inequality when they have this tiny carrot dangled in front of them.

“We’ve got to remember that our experiments are conducted in a lab at a university, not in the real world, which is far more complex. But these results could shed light on why people living in unequal societies aren’t more vocal in rejecting unfairness.

Co-author Anirban Kar of the Delhi School of Economics, adds: “It makes sense that when people see clear-cut unfairness in the system, they are more likely to reject an unequal outcome than if the same outcome was generated by a fair system.

“Participation in the system, surprisingly enough, even a symbolic one (a modicum of voice) seems to have a significant impact.”

Gianluca Grimalda of Universitat Jaume I, Castelló in Spain was a third author of the paper.

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5 Comments

1%? I’ll take those odds over the odds for winning the lottery any day. Plus getting into this 1% doesn’t depend solely on luck. You have some input.. with hard work, intelligence and perseverance you can increase your chances tremendously. A meritocracy if you will.

mikekrohde July 30, 2012

aha! you have exposed yourselves. the research done and never disputed to date is that the 1% enjoy good fortune more than the rest of us. bill gates is indeed a smart man, hard working etc., but would he be the 2nd richest guy in the world if his mom didn’t know the chairman of ibm? who knows. gates does and he still hasn’t admitted it because along with being so rich, most people want to believe the myth because it makes them special. we all like that. ask donald trump. he will tell you his father’s millions have nothing to do with his good fortune. and he would be wrong at least, and probably lying. go to new york broke and become the king of real estate and then we can talk. it won’t happen. trump shows his hubris every week on tv. like his beautiful wife would be there is he was broke. not happening. the 1% is terrified of this truth because once their good fortune is accepted for what it is, higher taxes make more sense. the “you’re taxing my hard work” instead of doing it yourself no longer holds water.

Entrevista August 5, 2013

It’s all about meritocracy: those who bring more results and add more value need to receive more than those who bring less results.

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